Transcript Project Finance Approach (2)

Global Wind day Emmeloord
June 2014, Marc Schmitz, Rabobank
Wind in Europe - Onshore and offshore
Onshore Wind - 2300 MW installed capacity in The Netherlands (2013)
Outlook
Markets & Trends
 Very competitive market
 Continued cost decreases
 Financial pressure on large
European turbine suppliers
 Nuclear pullbacks by European
countries put weight behind
renewable energy targets
 Recently growth mostly driven
by China
 New Dutch policy of 16%
renewable energy by 2020
 Healthy, albeit slowing growth
 Stabilizing financing market
margins
 More commitment from Dutch
government
 Pressure on subsidy schemes due
 Growth slowed in mature markets,
to economic downturn
in upcoming countries accelerating  Expected re-powering in Germany
growth
2014/2015 onwards
 Smaller transactions funded by
local banks
 Three large wind farms in The
Netherlands (Noordoostpolder) in
 Negative impact of shale gas in US
progress
on electricity prices
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Wind developments in The Netherlands
• Dutch Government’s objective of generating 14% of the country’s energy from renewables by 2020 and 16% by
2023.
• Scaling up offshore wind power to 4450 MW, operational in 2023. The existing and planned offshore wind power
capacity comes to a total of some 1000 MW. In addition to this, a total of 3450 MW will be contracted for by
means of phased procurement procedures commencing in 2015 and increasing as follows: 450 MW (2015), 600
MW (2016), 700 MW (2017), 800 MW (2018), and 900 MW (2019).
• In the case of onshore wind power, there will be investment within the frameworks agreed with the provinces in
order to achieve 6000 MW by 2020. Wind farm investors will introduce a participation model enabling local
residents to participate actively in the planning and operation of wind farms.
• According to the EIB, the various forms of direct investment arising from the measures allowed for in the Dutch
Energy Agreement will amount to an estimated EUR 13 bln to almost EUR 18 bln between 2013 and 2020. These
investments will play a significant role in achieving the agreement’s objective, i.e. sustainable growth for the
Netherlands, and will also provide the necessary short-term employment incentives in today’s difficult economic
circumstances.
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Levelised cost of different power technologies (USD/MWh)
Levelised cost of selected power technologies H1 2014 (USD/MWh)
Marine - wave
Marine - tidal
Wind - offshore
STEG - parabolic trough
STEG - LFR
STEG - tower & heliostat
Biomass - gasification
PV - thin film
PV - c-Si
PV - c-Si tracking
Geothermal - binary plant
Biomass - incineration
Municipal solid waste
Wind - onshore
Geothermal - flash plant
Landfill gas
Biomass - anaerobic digestion
Large hydro
Small hydro
Natural gas CCGT
Coal fired
CHP
Nuclear
1037
844
0
100
200
Regional scenarios
Fossil technologies:
300
400
Q2 2013 central
US
China
Europe
500
H1 2014
Australia
Note: LCOEs for coal and CCGTs in Europe and Australia assume a carbon price of $20/t. No carbon
prices are assumed for China and the US.
Source: Bloomberg New Energy Finance
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Deals in the Netherlands
• Gemini – 600 MW offshore wind
Characteristics/issues: due to deal size challenging to collect debt and equity portion
4 Projects in total
• NOP Agro – 195 MW onshore wind
Characteristics/issues: sponsor with limited equity & PF experience, relatively new turbine (7.5MW) > 1 GW
• Westermeerwind – 144 MW offshore / lakeshore wind
Characteristics/issues: sponsor with limited equity & PF experience, participation structure
• Zuidwester – 90 MW onshore wind
Characteristics/issues: Developed by Utility company
Pipeline:
Tender
Capacity (MW)
Operation (year)
2015
450
2019
2016
600
2020
2017
700
2021
2018
800
2022
2019
900
2023
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Large versus smaller wind project
Characteristics of large project
 Strong equity and EPC/O&M party (limit interfaces)
Characteristics of smaller project
 Strong and experienced EPC/O&M party that
 Experienced project management
gives enough comfort and if possible providing
 Structure in general more complex
completion guarantees
 Long-term contracts with acceptable and credit
worthy parties (PPA, EPC, O&M)
 Stable subsidy regime
 Good project management important
 Usually bilateral loan (smaller documentation and
mainly in Dutch language)
 Sufficient contingencies
 More simple structure
 Participation model in The Netherlands requirement
 Long-term contracts
under the Energy Agreement, but not always easy
to implement
 Extensive due diligence phase required
 Strong group of reliable and experienced advisors
 Start to finish to reach financial close takes medium
 Stable subsidy regime
 Limited interface risks
 Due diligence light
 Start to finish to reach financial close in short
term
to long-term
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NOP Agrowind
•
Enercon builds the project under a EUR 340m contract. Construction started in 2013 and is expected to finish in
september 2016
•
26 Enercon turbines of the E-126 7.5MW type. This is the largest turbine being produced worldwide
•
For Enercon, NOP Agrwind is a flagship project, being the largest project sporting E-126’s
•
Enercon provides operations and maintenance services to the project over a lifetime of 15 years after completion
EPK Contractor
•
Enercon guarantees a minimum availability of 97%. This guarantee is uncapped (unlike similar contracts offered by
competitors)
PPA Offtaker
•
Eneco provides a long term 15 year PPA contract. The contract provides a mechanism to to protect against low
market prices
•
Approximately 30 local farmers (and landowners) are shareholders in the project. They have been joining forces over
the last years to jointly develop the NOP Agrowind project as part of the Windpark Noordoostpolder
•
MLA, arranger of the EUR 200m commercial senior facilities together with KfW IPEX (EIB also lends EUR 150m)
•
Sole VAT lender, EUR 12m VAT facility
•
Lender to sponsors (other than Enercon) to enable equity injection (by Rabobank Noordoostpolder-Urk)
•
Hedge coordinator for the EUR 265m swap
•
Rabobank’s long-standing relationship with the sponsors meant a leading role in the structuring of the transaction
EPC Contractor
Equity
Rabobank Role in
NOP Agrowind
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Key success factors NOP Agrowind
 Strong EPC / O&M contract (1 EPC) with strong party Enercon and high commitment
 Strong PPA and stable subsidy scheme
 High requirements to project management and best in class advisors (legal, financial, technical)
 Flexible sponsor group willing to cooperate to get the deal done
 Experienced banking group (KfW, EIB and Rabobank), including good cooperation
 Result: transaction closed within 1 year
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Conclusions
 Onshore wind becomes a commodity and good asset
class
 Credit margins are competitive
 Promising market, good returns compared to the risks
in both the onshore and offshore sector
 The renewable energy targets as mentioned in the
Energy Agreement are ambitious, but the recent large
deals (> 1 GW)
help to achieve the target of 14%
2020.
 New parties are entering the market as the (offshore)
wind market is becoming more mature. New parties like
pension
funds,
insurance
companies,
Japanese
investors, Middle East and US investors and country
linked investment funds
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Questions
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